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. Last Updated: 07/27/2016

BP Amoco Decides to Quit Priobskoye Field in Siberia

Oil major BP Amoco said Friday that it was pulling out of Russia's Priobskoye oil field, citing low prices, a cutback in overall capital expenses and investment problems.

"This decision reflects the realities now governing the world oil industry," Richard Olver, chief executive of BP Amoco Exploration, said in a statement.

"We have looked very hard at the combined BP Amoco worldwide portfolio and found that we are not in a position to make a firm commitment to development of the Priobskoye field," he added.

The Amoco Eurasia Petroleum Co. won the right to be the exclusive foreign investor in Priobskoye, in the Khanty Mansiisk region of western Siberia, in 1993. Its operator is Russia's second-largest oil company Yukos.

Following the merger between Amoco and British Petroleum last year, the company has carried out a full review of its combined global investment portfolio, bearing in mind low oil prices, and decided not to pursue its interest in the project.

"This is first and foremost a portfolio decision," said Howard Chase of BP Amoco in Moscow. "The way BP operates is to try and be very clear about the areas where it wants to focus both its capital resources and its management effort."

He said low oil prices, still below last year's average despite a sharp recent rise following pledged output cuts by most major producers, and "significant cutbacks in the overall capital budget for the next few years" drove the decision.

But he also left no doubt that there were specific problems facing investors in Russia that had also contributed to withdrawal from the project.

"The difficulties surrounding major investment in Russia have been important in just shaping the climate," he said. "Now we feel it's important for the Russian industry to show that it can solve the immediate problems in order to build a basis of longer-term confidence. At the moment there's a great deal to be done to create a climate of investor confidence."